Labor senator Sam Dastyari quits over Chinese donations scandal

Embattled Labor senator Sam Dastyari has fallen on his sword, resigning from his frontbench roles as the donation scandal that engulfed him over the past week reached a crescendo.

The 33-year-old NSW senator quit as manager of opposition business in the Senate and shadow spokesman for consumer affairs, hours after Fairfax Media revealed he may have broken Labor Party rules on political donations by allowing Chinese donors to make payments on his behalf for travel and legal bills.

His resignation comes just 24 hours after the senator held an 'ask me anything' press conference, where he said that while he'd been "admonished" by Opposition Leader Bill Shorten, he had not been asked to resign or offered his resignation.

The furore was first triggered last week after Fairfax Media revealed Senator Dastyari had a business with links to the Chinese government pay a personal bill. It escalated when it emerged he appeared to take a pro-China line that contradicted Labor policy on the South China Sea and came to a head with new questions on Wednesday.

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Senator Sam Dastyari announces he will stand aside from the Labor frontbench.Credit:Wolter Peeters

The emotional senator, who took no questions, said he had spoken to Mr Shorten - who had vigorously defended the "junior" senator for days - and offered his resignation from the frontbench.

"From the beginning, I freely admitted that I made a mistake. I made all the necessary disclosures and what I did was within the rules but it was wrong," he said.

"In the past week, it's clear that the ongoing examination of my behaviour is taking attention away from bigger issues facing Australia and Australians. Yesterday, I called a press conference and answered questions. Today, I have reflected on that and decided that wasn't enough. It's clear to me now that this has become a distraction.

"I made a mistake and I'm paying the price. For that mistake...I will continue to serve with pride as a senator for New South Wales and I look forward to serving a Labor Party government in the near future in whatever capacity I can."

Senator Dastyari leaves after his short resignation statement.Credit:Wolter Peeters

In a statement Mr Shorten said his senator had "made a mistake and now he's paying a heavy price", while also hinting at a potential comeback.

"Sam is a young bloke with a bright future ahead of him. He has a lot to offer Labor and Australia," Mr Shorten said.

Liberal senator Cory Bernardi, who led the charge against Senator Dastyari last week, said he took "no personal pleasure" in the resignation.

"However I do think the Australian political system needs to be above reproach and compromise," he said. "This saga highlights the potential weaknesses that exist and the need for the body politic to restore faith in its representation of the Australian people.

I made a mistake and I'm paying the price

"A significant question that remains is how Bill Shorten and the Labor frontbench thought Senator Dastyari's position and conduct was in any way justifiable."

The 33-year-old Labor senator had held tough for a week in the face of mounting criticism but his colleagues had begun openly suggesting it was time for him to go.

Just a day earlier, Senator Dastyari had been given a dressing down and a "second chance" by Mr Shorten. During his Tuesday press conference he said 22 times he had made a mistake, but failed to answer one key question - why he had asked donors to pay his bills.

But in the hours leading up to the resignation, Fairfax Media revealed that federal and state Labor Party rules on political donations may have been broken.

The federal ALP's national platform contains a code of conduct for fundraising, first adopted in 1994, that all MPs are bound by.

The platform states that: "Members of the Parliament or candidates should not accept money or services on the party's or their own behalf, above the amount of $3000 from any one source. Donations that are accepted must be held in appropriate Labor Party central banking accounts styled in the form: Australian Labor Party Campaign Account."

Among other things the rules state all donations targeted for election campaigns or "in general, support the ALP" must be deposited with the ALP.

But a spokesman for the NSW Labor general secretary Kaila Murnain claimed legal advice "suggests" there had been no breach because the candidate pledge only applied to fundraising for the purposes of an election campaign or for the ALP.

Several senior Labor sources told Fairfax Media the matters should be referred to either the state administrative body or national executive and that Senator Dastyari appeared to have committed a breach.

"He is clearly outside the code of conduct and it should be a matter for the national executive," one former member of the federal executive said.

"His behaviour was highly inappropriate. It was also stupid."

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A former member of the NSW administrative committee said it was "a fair interpretation of the rules" to suggest Senator Dastyari had breached the NSW candidate's pledge.

Senator Dastyari was due to give a guest lecture at the University of Queensland on Wednesday evening but pulled the plug ahead of his resignation.

James Massola is south-east Asia correspondent based in Jakarta. He was previously chief political correspondent, based in Canberra. He has been a Walkley and Quills finalist on three occasions, won a Kennedy Award for outstanding foreign correspondent and is the author of The Great Cave Rescue.